In our recent E-Journal, cost management was one of the six priorities in the lead article dedicated to organizational recovery. Please remember that cost management is not the "slash and burn" culture that injures the organization, customers and staff. It starts with a value driven philosophy which is customer-centric followed by reinvention thinking on how we can do better through integration, innovation and interaction evaluations. What returns are generated with what risks and at what costs? Most organizations do not exhibit holistic, integrated cost understanding on all business aspects, segmented value propositions and customers preferences. The customers today control the value relationship!
Does your team understand what this means in their thinking around profitable relationships?
Many readily present transaction service cost data but are light on sales costs by channel to specific segments. How much do the implicit risks cost and are we competitive?
Cost management is not cost accounting. The priority is cost knowledge in everything we do and how those costs generate excess returns through the customer value proposition. Channels have proliferated with the Internet communications available today and more and more users are jumping on board for not only service transactions but also to purchase products. Segments such as women are accelerating this trend and service costs will be a fraction of "over-the-counter" expenses, as will be sales costs. Customer complaints are usually gems opening doors to unnecessary costs if they are managed for that purpose and not hidden amongst various branches and departments. What is the trend in variable costs versus fixed? You want to continuously build the variable portion and its benefit in terms of resources and capital.
The priority around cost today is a competitive necessity for survival, let alone profitability.
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CEO conversations today highlight a wave regulator interventions due to the recessionary stimulus role tagged on the financial services industry. In fact, some are finding a new propensity by regulators to overburden organizations with complex, costly rules, processes and,of course, audits. Every industry segment has to ensure a reasonableness, a balance in new requests, as well as evidence that they are realistic, proven demands versus knee-jerk applications which can deflect executives' attention away from the holistic business needs and the customer objective.
First, step back and evaluate your planning, control and reward systems that direct your business energy plus seriously assess your governance model and the Board makeup. Is your governance structure externally dynamic and internally vigilant with leading edge knowledge of strategic and performance issues? Regardless of the organization's size governance controls need to be independently assessed.
Second, differentiate between real regulations and auditors' personal standards. Regulations add costly burdens to the organization's business model. What is the need-solution equation? Challenge personal
rules which are duplications of current controls or do not support regulatory realities.
If your house is not in order and the governance function does not demonstrate the right needs for business
controls, you will attract additional regulator burdens. Also, appreciate the market and customer perceptions of your business performance, past and present. and the image they create for the public and regulators. Substantive, systemic risk controls are a necessity whereas intervention regulatory razzle can only increase operating costs and detract from the firm's profitability.
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The transformation of cultures,policies, strategies and processes is where the financial services industry should be at, relative to change and challenges. This is both a short-term and a long-term need, especially in the risk-reward equation at all levels starting with the CEO/Board, through the senior leadership team into every business unit. Trust has to be rebuilt, demonstrated and progressively improved through customer-centric, successful solutions. The industry is vital to recovery in every local, national and international economy and we have to accept the transformation objective with determination and customer dedication.
The contemporary challenges we face, demand a better understanding on why and how the enterprise devotes itself to its customers- the customer value proposition must be the centrepiece of the corporation.
Within that proposition, there is a need to understand the key profit drivers which are crucial in making dynamic decisions in today's markets. Even the largest organization can no longer innovate, build, manufacture and deliver all the elements by themselves in a highly competitive, segmented world. Syndicated and seamless sourcing are implicit to the new packaging foundation for customer value propositions.
From a competitive viewpoint, this recessionary window could be a fortuitous footing for more non-financial brands to enter the financial services arena with others who are already eroding traditional market shares.
They will invite your customers to simpler, economical, virtual solutions.
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